MARKET RALLY EVAPORATES: What you need to know

Stocks
took the stairs up and the elevator down on
Tuesday.REUTERS/David
Ryder

Stocks had another brutal day on Tuesday, closing in the red
after a furious rally early in the day was completely erased in
the final hour of trading.

On Tuesday morning, the Dow was up as many as 420 points in a big
bounce after
Monday's 588-point loss. The S&P 500 and Nasdaq were also
up nearly 3% early in the day.

The market, however, couldn't hold on to its gains in a
disappointing close, and the Dow finished about 600 points off
its highs while the S&P had
its biggest one-day reversal since October 2008 at the height
of the financial crisis. In just the last week, the S&P
500 is down almost 11%.

The scoreboard:

Dow: 15,666.44, -204.9, (-1.3%)

S&P 500: 1,867.62, -25.6, (-1.3%)

Nasdaq: 4,506.49, -19.8, (-0.4%)

And now the top stories on
Tuesday:

It was another chaotic day in global markets, as US stock
futures rallied overnight despite another collapse in China.
After opening sharply higher, US stocks pushed to their highest
levels of the day near mid-afternoon, with the major indexes
pushing a gain of nearly 3% on the day, almost erasing Monday's
losses. The averages, however, gave up all of this ground in the
second half of the day and closed near the lowest levels hit
during Monday morning's wild open.

Rich Barry, floor governor at The New York Stock Exchange,
wrote in an afternoon email to Business Insider that Tuesday's
afternoon rally was about two things: China and Goldman Sachs.
After Chinese markets closed on Tuesday, the People's Bank of
China, China's central bank, moved to
cut interest rates and reserve requirements, giving a final
boost to stock futures that had already been gaining overnight.
Goldman Sachs, meanwhile,
circulated a note to clients reiterating the firm's call
that the US does not appear headed for recession. But again,
these gains couldn't hold.

On the economic data front, we got three pieces of
information about the housing market
that showed home prices, on balance, rose in June, while
new-home sales rose 5.4% in July. The FHFA home price index
rose 0.2% in June, less than the 0.4% that was expected. The
Case-Shiller home-price index showed prices fell 0.1% over the
prior month in June but rose 5% when compared to last year. New
home sales rose 5.4% in July to an annualized pace of 507,000.

We also got
consumer-confidence data on Tuesday that showed a huge
bounce back from July, as the Conference Board's reading for
August came in at 101.5. In the report, Lynn Franco at the
Conference Board said, "Consumers' assessment of current
conditions was considerably more upbeat, primarily due to a
more favorable appraisal of the labor market ... The
uncertainty expressed last month about the short-term outlook
has dissipated and consumers are once again feeling optimistic
about the near future. Income expectations, however, were
little improved."

Also in economic data, the Richmond Fed's manufacturing
activity index fell to a reading of zero in August after
registering a 10 in July, while the preliminary reading on US
service sector activity fell to 55.2 — which still indicates
expansion — in the early part of August after hitting 55.7 in
July.